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Ethereum Miners Raked in Nearly $300 Million Last Month as Hashrate Breaks New Highs

The DeFi boom has brought in a rush of Ethereum miners with hashrate making new ATHs, but is the business sustainable? 

Ethereum Mining back in the green

Key Takeaways

  • Ethereum mining hashrate reached a new all-time high (ATH) of 250 TH/s on Oct. 6, 2020. 
  • The parabolic increase coincides with the boom in DeFi. 
  • However, the growth might be temporary with proof of stake (PoS) implementation planned for ETH 2.0. 

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Ethereum’s hashrate has surged to new all-time highs, marking an 80% increase since the beginning of the year. However, the replacement of the Proof-of-Work (PoW) protocol in ETH 2.0, along with decreased earnings for miners, questions the sustainability of the rise. 

Miners Rush to Earn High Fees 

The rise of Etherum’s hashrate clearly coincides with the yield farming craze in DeFi. Not only is hashrate rising, but Ethereum miners are also making much more money than even Bitcoin miners.

The earning from fees has added to the block rewards for mining ETH during the last quarter. On the day of the UNI token launch, 75% of the miner revenue was earned from fees. 

Since the halving event in May, BTC miners have made roughly $10 million per day securing the network. Meanwhile, ETH miners have been steadily stacking fees, until reaching a peak of $16 million on Sept.3. More than half of these earnings was from fees rather than block rewards. 

Before the DeFi boom, ETH miners earned between $2 and $3 million per day.  

Glassnode Miner Revenue
Total miner revenue: Bitcoin (pink) vs. Ethereum (green). Source: Glassnode 

The total mining revenue for ETH miners has witnessed three spikes in the last quarter and is again reaching parity with Bitcoin. 

Is Ethereum Mining Sustainable? 

Ethereum’s mining industry is expected to dissolve with the imminent launch of the Proof-of-take (POS) consensus algorithm on ETH 2.0. The upgrade will place a smaller premium on hardware and transition to financial incentives to ensure trustworthy network participation. 

The current cost to become an ETH validator, for instance, is 32 ETH, nearly $11,000 at press time. Validators that falsely validate blocks will be penalized with fees. Others, who behave honestly, will be rewarded with a steady revenue stream. 

Nevertheless, it is another two to three years down the line until ETH 2.0 replaces the current ETH 1.0 chain. According to the current hardware costs, however, new miners may not find it economically viable to join the network in the meantime.

Ethereum Hashrate
Ethereum Mining Total Hashrate Source: Glassnode

For reference, the most powerful GPU mining set-up, according to F2pool, would cost around $20,000. At the current profitability, these miners would make $6,000 per year.

Hence, the break-even period is more than three years, roughly the time when ETH 2.0 is expected to launch. 

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